Gas storage

Every little helps

Fixing the weakest link in Britain’s energy infrastructure

A NEW winter tradition is emerging in Britain. Whenever a cold snap occurs, commentators fret that the country's tiny stores of natural gas (which provides around two-fifths of electricity and heats over three-quarters of all homes) will run out. Such worries were particularly acute this winter, the coldest for 30 years.

Sighs of relief, then, on February 15th, when the Gateway Storage Company announced that it had been awarded a licence to build the first big new gas-storage facility in many years. The firm plans to spend £600m ($940m) carving out 20 vast storage chambers in the salt beneath the Irish Sea and building a processing terminal at Barrow-in-Furness. When it begins operations in 2014, it will boost Britain's gas-storage capacity by around 30%.

That sounds impressive, but it will still leave Britain behind other European countries (see chart). For decades plentiful production from the North Sea meant that storage was unnecessary. Production has been declining since 2000 (in 2008 it was around two-thirds of its 2000 level), and Britain is importing more and more of its gas from Norway, Europe and the Middle East. But storage capacity—vital to smooth over fluctuations in supply and demand—has risen by only about 1% since 2000, according to National Grid, which runs the gas network. Some of the rise reflects small, new projects, but most has come from upgrades to Rough, an old gasfield now run as a storage site by Centrica, a big energy firm. Rough provides three-quarters of Britain's storage, which is worrying in itself: in February 2006 a fire disabled the field for several months. Fortunately, the worst of the winter that year was over.

Demand for gas is likely to rise. Around a third of British power stations will need replacing by 2015. Although the government talks a lot about nuclear and renewable energy, so far much of the new capacity looks likely to be gas-fired.

Given that North Sea production has been dwindling for a decade, why has it taken so long for more storage to be built? Some point the finger at Britain's laissez-faire approach to energy. “Regulation in the UK is pretty light-touch,” says George Grant of Gateway Storage. “That's one reason why you don't see the reserves levels you get in France or Germany.” That may change: political parties, academics, firms and even Ofgem, the energy regulator, all now argue that more state intervention will be needed in future.

Others blame the Crown Estate, which owns the seabed around Britain. They complain that it has jacked up access prices. (Crown Estate profits flow into the Treasury, which faces a fiscal crunch.)

Building on dry land is difficult too: suitable sites are rare, and Britain's planning system hands obstreperous local residents a lot of power. And finally energy-retail firms lack the expertise to run gas-storage sites, and oil-and-gas production companies are not usually interested (Centrica, which both extracts gas and sells it to consumers, is an exception).

But Mr Grant sees some reasons to be cheerful. The 2008 Energy Act made helpful tweaks to the rules for subsea storage projects. And he is less damning about the Crown Estate than some. Now that his firm has blazed a trail, he says, others should find it easier to follow.